EU Implementing New Registration and Reporting Rules From January 2025

Effective January 1, 2025, the European Union is introducing a revised VAT scheme designed to support small and medium-sized enterprises (SMEs) across its Member States. This new framework aims to standardize VAT registration thresholds and extend these benefits to non-resident EU businesses.

Key features of the new VAT scheme

Uniform VAT exemption thresholds:

• Existing rule: Individual thresholds are permitted in Member States for VAT exemptions applicable to domestic small enterprises.

• New rule: A unified exemption threshold will be set, capped at €85,000 across all Member States.

Extended VAT exemption for non-resident SMEs:

• Existing rule: Only businesses established within a Member State can benefit from VAT exemptions.

• New rule: SMEs based in one EU state but operating in another will be able to access VAT exemptions. This is contingent on their turnover being below the national threshold of the operating state and their total EU-wide turnover not exceeding €100,000.

Administrative simplification:

• The new scheme offers streamlined registration and reporting processes, potentially reducing VAT compliance costs for SMEs by up to 18% annually.

• A single registration window in their home Member State simplifies processes for SMEs.

Objective and impact

This reform seeks to level the playing field for businesses across the EU, irrespective of their country of establishment. By reducing administrative burdens and compliance costs, the EU aims to foster a more conducive environment for SME growth and cross-border operations.